Subsidiary stock divident

SURGDIARY EQurTY TRANSACTIONS, INDRRCT SURCARY ONERSHER AND SuaaDARY OwNERSHP Oor PARENT SHARES EXERCISES Exercise 1 (L01) Subsidiary stock dividend. On January 1, 2015, Talbot Company acquires 90% of the outstanding stock of Lego Company for $810,000. At the time of the acquisition, Lego Company has the following stockholders equity: Common stock ($10 par).. Paidin capital in excess of par Retained eanings Tolal stockholders' equity... $300,000 150,000 200,000 $650,000 It is determined that Lego Company's book values approximate fair values as of the purchase date. Any excess of cost over book value is attributed to goodwill. On July 1, 2015, Lego Company distributes a 10% stock dividend when the fair value of its common stock is $40 per share. A cash dividend of $0.50 per share is distributed on December 31, 2015. Lego Company's net income for 2015 amounts to $108,000 and is earned evenly throughout the year. I. Prepare the entry required on Lego Company's books to ted on July 1, 2015. Prepare the stockholders' equity section of the Lego Company balance sheet as of December 31, 2015. 2. Prepare the simple equity method entrics that Talbot Company would make during 2015 to record its investment in Lego Company. 3. Prepare the climinations that would be made on the December 31, 2015, consolidated worksheet. (Assume the use of the simple equity method.) Prepare a determination and dis- tribution of excess schedule to support the climination. reflect the stock dividend distribu